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AEW UK REIT plc AEW UK REIT plc: NAV Update and Dividend Declaration

Mon 25th January, 2021 7:00am
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   AEW UK REIT plc (AEWU)
   AEW UK REIT plc: NAV Update and Dividend Declaration

   25-Jan-2021 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   25 January 2021

                                        

                        AEW UK REIT Plc (the "Company")

    

                      NAV Update and Dividend Declaration

                                        

   AEW UK REIT plc (LSE: AEWU) (the "Company"), which, as at 25 January 2021,
   directly owns  a  diversified  portfolio  of  35  regional  UK  commercial
   property assets,  announces  its unaudited  Net  Asset Value  ("NAV")  and
   interim dividend for the three month period ended 31 December 2020.

    

   Highlights

    

     • Interim dividend of 2.00 pence per share for the three months ended 31
       December 2020, in line with the targeted annual dividend of 8.00 pence
       per share. 
     • EPRA earnings per share ("EPRA EPS") for the quarter of 1.68 pence (30
       September 2020: 1.60 pence).
     • NAV of £151.88 million or 95.87 pence per share as at 31 December 2020
       (30 September 2020: £147.24 million or 92.73 pence per share).
     • NAV total return of 5.53% for the quarter (30 September 2020: 1.46%).
     • During the  quarter  the  Company completed  the  acquisition  of  the
       multi-let Westlands  Distribution  Park  in Weston  Super  Mare for  a
       purchase  price   of £5.4m.   Contracts   were  also   unconditionally
       exchanged to dispose of Sandford House, Solihull for consideration  9%
       above its valuation at £10.5m. Further investment and asset management
       activity is noted below.
     • The Company remains conservatively geared with a loan to NAV ratio  of
       26.01% (30  September  2020: 26.83%).  As  at 31  December  2020,  the
       Company had a cash balance of £7.52 million and has £13.66 million  of
       its loan facility available to draw up to the maximum 35% Loan to  NAV
       at drawdown.
     • For the rental quarter commencing on 25 December 2020, 90% of rent has
       been collected or  is expected  to be received  under monthly  payment
       plans prior to quarter end. A further  1% of income is expected to  be
       received under agreed,  longer term payment  plans.  The remainder  of
       rents owed will continue to be pursued.

    

   Alex Short and Laura Elkin, Portfolio Managers, AEW UK REIT, commented:

   "We are pleased to  see some NAV  recovery this quarter  which is due,  in
   part, to  the team's  ongoing drive  to maximise  value from  the  assets'
   business plans.  Asset management has always  been a key feature of  AEW's
   strategy, and something we have  prioritised in uncertain markets such  as
   we experienced in 2020  where gains were  more hard-fought.  We  announced
   just prior to Christmas the agreed sale of the portfolio's Solihull office
   building following the completion of its business plan.  The sale has been
   achieved at a level 9%  ahead of its prevailing  valuation at the time  of
   exchange  and  94%  ahead  of  its  acquisition  price  with  no   capital
   expenditure having been incurred on  the property over its hold  period. A
   15-year lease  renewal was  signed with  the tenant  in June  2020,  which
   increased the passing rental income by 30%.  

   Strong NAV recovery was also  driven by the portfolio's weighting  towards
   warehousing and industrials.  This sector comprises 56% of the portfolio's
   value and saw  a like-for-like  valuation increase during  the quarter  of
   7.6%.  Despite this,  we consider that  the portfolio's overall  valuation
   remains conservative when  measured against alternative  use values, at  a
   low capital value of only £56 per sq ft.  This is low by design due to our
   stock selection criteria for the Company having been to seek assets  whose
   alternative use  values are  expected to  exceed current  value since  its
   initial ramp  up.   We believe  that  this positions  the  portfolio  both
   defensively and opportunistically.  

   The Company's EPRA EPS for the  quarter increased by 0.08 pps although  it
   remains below  the dividend  level of  2.00  pps. This  is partly  due  to
   ongoing remedial works at its property in Blackpool, which had a  negative
   impact of 0.13 pps  for the quarter. The  expenditure is accretive to  the
   value of the property and a  corresponding positive effect is expected  in
   the valuation movement. The Company's  provision for doubtful debtors  has
   also increased by £0.27 million, which  has had a negative impact of  0.17
   pence on the EPRA EPS for the quarter. In 2021, we expect to increase  the
   Company's earnings as we look to return to full investment. Based upon our
   current pipeline, we expect  the first half of  2021 to provide some  very
   attractive investment  opportunities, a  number of  which we  are  already
   pursuing.  

   Features integral  to the Company's  strategy give us  confidence that  it
   is strongly positioned for the current economic conditions, including  its
   conservatively managed debt  exposure, its diversified  portfolio and  its
   high levels of rent collection."

   Valuation movement

   As at 31  December 2020, the  Company owned investment  properties with  a
   fair value of  £182.65 million. The  like-for-like valuation increase  for
   the quarter of £5.90 million (3.44%) is broken down as follows by sector:

   Sector     Valuation 31 December 2020 Like-for-like valuation movement for
                                                                  the quarter
                    £ million          %           £ million                %
   Industrial          102.90       56.3                 6.90            7.61
   Office               45.55       24.9               (0.30)          (0.65)
   Retail               21.65       11.9               (0.25)          (1.14)
   Other                12.55        6.9               (0.45)          (3.46)
   Total               182.65      100.0                 5.90            3.44

    

    

    

   Net Asset Value

   The Company's unaudited NAV as at 31 December 2020 was £151.88 million, or
   95.87 pence per share.  This reflects an increase  of 3.15% compared  with
   the NAV per share as at 30 September 2020. The Company's NAV total return,
   which includes the interim dividend of 2.00 pence per share for the period
   from 1  July 2020  to 30  September 2020,  was 5.53%  for the  three-month
   period ended 31 December 2020.
    

                                                 Pence per share  £ million 
   NAV at 1 October 2020                                    92.73     147.24
   Capital expenditure                                     (0.02)     (0.03)
   Valuation change in property portfolio                    3.44       5.46
   Valuation change in derivatives                         (0.01)     (0.02)
   Income earned for the period                              2.62       4.15
   Expenses and net finance costs for the period           (0.93)     (1.48)
   Interim dividend paid                                   (2.00)     (3.17)
   Share buybacks*                                           0.04     (0.27)
   NAV at 31 December 2020                                  95.87     151.88

   *the share buybacks reduce the Company's overall NAV as well as the  total
   number of shares in circulation (refer to equity section below). In  these
   instances, where the  price is  at a discount  to the  prevailing NAV  per
   share, the effect is an increase in the Company's NAV per share.

    

   The NAV  attributable to  the ordinary  shares has  been calculated  under
   International  Financial   Reporting   Standards.  It   incorporates   the
   independent portfolio valuation as at 31 December 2020 and income for  the
   period, but does not include a provision for the interim dividend for  the
   three month period to 31 December 2020.

    

    

   Dividend

    

   Dividend declaration

   The Company today announces  an interim dividend of  2.00 pence per  share
   for the  period from  1 October  2020 to  31 December  2020. The  dividend
   payment will be made on 26  February 2021 to shareholders on the  register
   as at 5 February 2021.  The ex-dividend date will be 4 February 2021.

    

   The dividend of  2.00 pence per  share will be  designated 1.00 pence  per
   share as an interim  property income distribution  ("PID") and 1.00  pence
   per share as an interim ordinary dividend ("non-PID").

    

   The EPRA EPS for the three-month period to 31 December 2020 was 1.68 pence
   (30 September 2020: 1.60 pence).

    

   Dividend outlook

   It remains the Company's  intention to continue to  pay dividends in  line
   with its dividend policy,  however the outlook  remains unclear given  the
   current COVID-19  situation.  In  determining  future  dividend  payments,
   regard will be given to the circumstances prevailing at the relevant time,
   as well as the Company's requirement, as a UK REIT, to distribute at least
   90% of  its  distributable  income  annually,  which  will  remain  a  key
   consideration.

    

   Financing

    

   Equity and share buy-back

   The Company's share capital consists of 158,774,746 Ordinary Shares, of
   which 350,000 are currently held by the Company as treasury shares. This
   reflects the following share buybacks which occurred during the quarter:

   Date            Number of Shares Price (pence) Gross consideration (£)
   14 October 2020 200,000          76.5          153,000
   3 November 2020 150,000          73-73.5       109,995

    

   Debt

   The Company  had borrowings  of £39.50  million as  at 31  December  2020,
   producing a Loan to NAV ratio of  26.01% and had a total undrawn  facility
   of £20.50 million of which £13.66 million was available as at 31  December
   2020 up to the maximum 35% Loan to NAV at drawdown.

    

   The loan continues to attract interest at LIBOR + 1.4% and as a result  is
   currently  benefitting  from  lower  LIBOR  rates.  The  Company's  all-in
   interest rate as at 31 December 2020 was 1.45%.

    

   To mitigate the risk  of interest rates rising,  the Company has  interest
   rate caps effective for the remaining  term of the loan, capping LIBOR  at
   1.0% on a notional value of £51.50 million.

    

   Rent Collection

   As at  the  date of  this  announcement,  the Company  had  collected  the
   following rental payments  for the rental  quarter commencing 25  December
   2020 and for previous quarters since  the onset of the covid-19  pandemic,
   expressed as a percentage of the quarter's total rental income:

    

   Current Position as at 25 January 2021     Q1 2020 Q2 2020 Q3 2020 Q4 2020
   Received                                       95%     89%     87%     64%
   Monthly Payments Expected Prior to               -       -       -     26%
   Quarter End
                                                  95%     89%     87%     90%
   Agreed on longer term payment plans             2%      3%      4%      1%
                                             
   Under Negotiation                               2%      4%      1%      1%
                                                  99%     96%     91%     92%
   Outstanding                                     1%      4%      9%      8%
   Total                                         100%    100%    100%    100%

    

   It should be noted that this is an evolving picture with further  payments
   being received each week. 

    

   If collection proceeds as shown above, the Company expects to have
   collected 92% of total rent owed during 2020 by the end of the current
   quarter.  For any amounts that remain outstanding that are owed by larger
   tenant companies who are known to have significant financial resources,
   the Company shall be pursuing these tenants where legally able to do so.

    

   Asset Management Update

    

   During the quarter  the Company completed  the following asset  management
   and investment transactions:

   Westlands Distribution  Park, Weston  Super Mare  - During  November,  the
   Company  announced   that  it   had  acquired   the  multi-let   Westlands
   Distribution Park in Weston-Super-Mare for a purchase price of £5.4m.  The
   purchase price reflects  a low  capital value  of £175,000 per acre  which
   provides strong  potential  for future  capital  value growth  based  upon
   nearby      comparable      land       transactions      which       range
   between £350,000 and £500,000 per   acre   for   other   commercial    and
   residential uses. The estate provides a net initial yield of 6.4% which is
   expected to increase  to at least  7.4% in the  medium term.  The  average
   passing rent of £1.50 per sq ft also provides strong potential for  rental
   growth. The established  323,437 sq ft  estate  is   let  to  15   tenants
   including North  Somerset District  Council which  represents 30%  of  the
   income stream.  It is located 3  miles from the M5  Motorway and 20  miles
   south of Bristol city centre.

    

   Sandford House, Solihull - During December, the Company announced that  it
   had unconditionally exchanged  contracts for the  sale of Sandford  House,
   Homer Road, Solihull for  £10.5  million.   The  sale  price  crystallises
   significant profit by exceeding both the valuation level immediately prior
   to the sale by over  9% and the acquisition  price by 94%.  The asset  was
   acquired in August  2015 for £5.4  million and has been  fully let  to the
   Secretary of State for Communities  and Local Government since this  time,
   producing a  net income  yield against  the purchase price  of  9.6%.  The
   Company invested no further capital in the asset during its hold  period. 
   A new 15-year  lease agreement was  signed with the  tenant in June  2020,
   which increased the  rental income  received from the  asset by  30%.  The
   lease also  provides for  five yearly,  open market,  rent reviews  and  a
   tenant break option at year  10. The tenant intends  to carry out a  major
   refurbishment of the property over the  coming weeks.  The sale is due  to
   complete on 1 February 2021 and the  Company will receive income from  the
   asset until this date.

    

   Bath Street, Glasgow - In October the Company exchanged contracts to  sell
   its 85,000 sq ft office holding at 225 Bath Street in Glasgow City  Centre
   to a subsidiary company of  IQ Student Accommodation.  The transaction  is
   conditional upon  various  matters  including  the  granting  of  planning
   permission  for  the  development  of   a  480  bedroom  student   housing
   development.

   Moorside Road, Swinton - Following the administration of previous  tenant,
   Nationwide Crash Repair Centres Limited on 3 September, a new letting  was
   completed to HB Accident Repair Network Ltd during November.  The  letting
   provides a  new 10  year lease  with a  tenant break  after year  5 and  3
   months' rent free.  The commencing rent  of £122,500 pa exceeds the  level
   of rent  paid  by the  previous  tenant by  £11,000  pa.  The  lease  also
   provides for  an RPI-linked  review at  year 5  if the  tenant remains  in
   occupation. 

   Sarus Court, Runcorn  - A new  letting to Di-tec  Power Ltd was  completed
   during December on 14,000 sq ft at this multi-let industrial estate.   The
   new lease provides for a 10 year  term and allows the tenant an  incentive
   of 7 months' rent free.  The rental level of £5.65 per sq ft proves a  new
   high tone for the estate and exceeds the asset's previous estimated rental
   value level of £5.50 per sq ft.

   Storeys Bar Road, Peterborough  - In November the  Company completed a  15
   year lease renewal to existing tenant, Wyndeham, achieving a net effective
   rental uplift from  £2.95 per sq  ft to  £3.50 per sq  ft, increasing  the
   annual rent received from the asset  by £115,000.  The lease provides  for
   tenant break options  at the end  of years 3,  6 and 9.   No rent free  or
   other incentive was granted to the tenant.

   Brightside Lane, Sheffield - Post quarter end, the Company has  documented
   the settlement of a rent  review dated April 2020  at these 120,000 sq  ft
   industrial premises.  The new rent has been set at £374,000 pa equating to
   £3 per sq ft  which represents an  increase of 7%  above both the  current
   rent and valuer's estimated rental value.

    

    

    

   Enquiries                       
   AEW UK                          
   Alex Short                      1 alex.short@eu.aew.com
                                  +44(0) 20 7016 4848
                                   2 Laura.elkin@eu.aew.com
   Laura Elkin
                                  +44(0) 20 7016 4869
   Nicki Gladstone                 3 nicki.gladstone-ext@eu.aew.com
                                  +44(0) 7711 401 021
   Company Secretary               
   Link Company Matters Limited   aewu.cosec@linkgroup.co.uk
                                  +44(0) 1392 477 500
                                   
   TB Cardew                       4 AEW@tbcardew.com
   Ed Orlebar                     +44 (0) 7738 724 630

   Tania Wild                     +44 (0) 7425 536 903
   Lucas Bramwell                 +44 (0) 7939 694 437
                                   
   Liberum Capital                 
   Gillian Martin / Owen Matthews +44 (0) 20 3100 2000

    

    

    

   Notes to Editors

    

   About AEW UK REIT

    

   AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total return  to
   shareholders by investing predominantly  in smaller commercial  properties
   (typically less  than  £15 million),  on  shorter occupational  leases  in
   strong commercial  locations across  the United  Kingdom. The  Company  is
   currently invested in office, retail, industrial and leisure assets,  with
   a focus  on  active asset  management,  repositioning the  properties  and
   improving the  quality of  income streams.   AEWU is  currently paying  an
   annualised dividend of 8p per share. 

    

   The Company was listed  on the Official List  of the UK Listing  Authority
   and admitted to trading on the Main Market of the London Stock Exchange on
   12 May 2015.  5 www.aewukreit.com

    

   LEI: 21380073LDXHV2LP5K50

    

   About AEW UK Investment Management LLP

    

   AEW UK Investment Management LLP employs a well-resourced team  comprising
   26 individuals  covering  investment,  asset  management,  operations  and
   strategy. It is part of AEW Group, one of the world's largest real  estate
   managers, with €69.0bn of assets under management as at 30 September 2020.
   AEW Group  comprises  AEW SA  and  AEW  Capital Management  L.P.,  a  U.S.
   registered  investment  manager  and  their  respective  subsidiaries.  In
   Europe, as at 30 September 2020, AEW Group managed €32.9bn of real  estate
   assets on behalf of a number of funds and separate accounts with over  420
   staff located  in 9  offices.  The Investment  Manager  is a  50:50  joint
   venture between the principals of the  Investment Manager and AEW. In  May
   2019, AEW UK Investment Management LLP was awarded Property Manager of the
   Year at the Pensions and Investment Provider Awards.

    

    6 www.aewuk.co.uk

   ══════════════════════════════════════════════════════════════════════════

   ISIN:           GB00BWD24154
   Category Code:  MSCM
   TIDM:           AEWU
   LEI Code:       21380073LDXHV2LP5K50
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   92122
   EQS News ID:    1162710


    
   End of Announcement EQS News Service

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References

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   1. mailto:alex.short@eu.aew.com
   2. mailto:Laura.elkin@eu.aew.com
   3. mailto:nicki.gladstone-ext@eu.aew.com
   4. mailto:AEW@tbcardew.com
   5. https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=9220892e63355ca6947a3a3423a3bac8&application_id=1162710&site_id=reuters8&application_name=news
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